With its strategic location and free-market policies, the City of Gold has become the epicenter of pulse trading in the Middle East.

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Over 70,000 visitors—among them food traders, professional chefs, trade ministers and marketing personnel—attended Gulfood 2013, the world’s largest annual food trade show. Held the last weekend of February in Dubai, the convention hosted a record 4,200 exhibitors from 110 countries. Some 50,000 brands representing every sector of the food and beverage industry showcased their products in the Dubai World Trade Centre’s massive 1.2 million square foot convention hall, the most important of its kind in the region.

The magnitude of the event clearly demonstrates the importance of Dubai for food trading in the Middle East. Gulfood has grown exponentially since it began more than 25 years ago, as food and beverage companies from around the world have flocked to Dubai with dollar signs in their eyes. Benefiting from its centralized location, liberal economic policies and freely convertible currency, the desert city has become the indisputable gateway to one of the world’s fastest growing markets.

201305_PULSE_Feature_Dubai Gateway To The Middle East Pulse Trade

“While Gulfood has attracted more and more exhibitors every year from a growing number of countries, this year’s exhibition will welcome more government ministers and country delegations than ever before. This is a clear indication of the stature and importance of Gulfood in elevating Dubai’s position as the region’s leading gateway for trade between East and West,” said H.E. Helal Saeed Almarri, CEO of Dubai World Trade Centre, at the official Gulfood 2013 press conference.

With a population of just 8.2 million and a land area of 30,000 square miles, most of which is desert, the United Arab Emirates may seem an unlikely candidate for such a role at first glance. But less than half of the $7.7 billion (2011) in imported food that arrives in Dubai each year actually remains in the country. The rest is re-exported to other GCC countries (particularly Iraq and Iran), the Indian subcontinent and Africa. Exact figures are hard to pin down due to the large volume of unreported trading, but some estimate that Dubai exports as much as 80 percent of all the food it imports. The Industrial Bank says the UAE is the third largest re-exporter in the world.

In recent years Dubai has faced competition from Abu Dhabi and Bahrain, two cities that are essentially trying to match or surpass its role as a financial and banking center. With a growing population, a higher per capita income and an imported food market expected to double by 2020, the GCC region probably has room for more than one Dubai, but for now the City of Gold continues its reign.

 

From Arab Backwater to Trading Hub

The story of Dubai as a trading hub for the Middle East is remarkable. The city’s transformation “from poor Arab backwater into flourishing city-state,” as described by Sudhakar Tomar, managing director of Hakan Agro DMCC, is in large part the result of a decision to reject the region’s conservative approach to business.

“Dubai is built on a business ideology of ‘Be hospitable to the business and to those who bring that business to the country’,” said Tomar.

Samuel Peck of SKE Midwestern, a specialty crop processor and trader with close ties to Dubai, traces Dubai’s development back to the early 90s, when the city’s leaders recognized an opportunity.

“Many years ago when the late Sheik Maktoum bin Rashid Al Maktoum saw that the oil reserves in the emirate of Dubai would not last, he decided to turn Dubai into the financial and business center for the Middle East. Sheik Maktoum ruled Dubai from November 1990 to January 2006. He is the main factor for Dubai being the city it is today, his vision and willingness to accept more progressive ideas then the rest of the conservative Middle Eastern nations,” Peck told IFT.

“Dubai is very centrally located and its port, Jebel Ali, has become a major port in the Middle East. Large container vessels come in to Jebel Ali and unload cargo for sale in the local market, as well as throughout the Arabic countries. As countries like Iraq and Iran have slowly developed a middle class and demanded more good quality food stuffs, Dubai has grown in importance,” Peck added.

Unlike most other cities in the region, Dubai has developed the necessary infrastructure and business environment to support a multi billion dollar food trade. Its relative safety, political stability and central location have made it an attractive place to do business for Western companies. The city imposes no taxes on company profits or personal income, no restrictions on capital movement, and UAE currency is easily exchanged between Iran, Iraq, Kuwait, Oman and Bahrain.

“Once the infrastructure and trade-enabling anchor organizations were in place, support sectors like banks, insurance, maritime and shipping services followed, further strengthening the reputation of Dubai as a trading hub. Owing to all these benefits more than 150 food processing plants sprang up in Dubai, representing over $5 billion in sales with a growth rate of 10 percent per annum,” said Tomar.

The Pulse of Dubai

Though pulse producers and traders from around the world have already established strong relationships with Dubai and the Middle East, the market continues to expand as demand shifts to new specialty crops. Iraq and Iran are the top buyers in the region, though the market for different products often fluctuates with changes in political and economic activity.

“Iraq used to import mostly white pea beans, at least 30,000 mt per year, but this was because the government, along with US involvement, controlled the imports and distribution. About three years ago, the Iraqi government tenders and aid stopped, and the population demand for white beans changed.  It reverted back to what is liked, not what is cheapest to distribute,” said Peck.

Alubia type white beans are now the white bean of choice and pea beans are barely ever traded to Iraq at all now. So white beans of US and Ethiopian origin that five years ago saw a lot of demand now see very little, and Argentina and China have taken over as suppliers to this region,” he added.

Dubai’s food trading relationship with Iran, which represents roughly a quarter of demand, has also been pivotal in recent years. With current economic sanctions limiting the county’s ability to purchase pulses from many Western nations, Dubai provides a neutral playing field for Iranian importers. Peck explains:

“There are no sanctions when it comes to selling a registered Dubai or UAE company. What is sold to Dubai has no baring on where it goes from there, so obviously Dubai plays a very big roll in what is being shipped to Iran. China can ship directly to Iran, but not the US, Australia, Argentina, or Canada.”

“Money exchange and transfer has gotten more difficult in the last year, but previous to this, money flowed rather smoothly from Iran into and out of Dubai. Iranian banks are well established in the UAE,” he added.

Combating the international pressure on banks that supply credit and accounts to Iranian companies remains one of the biggest challenges for the Dubai food trading community. However, more and more companies are recognizing the huge potential of investing in Dubai’s food trade, as evidenced by the size of Gulfood 2013. Regional Director of the Agricultural Trade Office of the U.S. Consulate, Jude Akhidenor, described the situation at February’s press conference:

U.S. exports of food and agriculture to the GCC have grown from US$839 million in 2000 to over US$2.7 billion in 2012. Not only does this reflect consumers’ preference for and confidence in U.S. brands, it also shows that American producers have recognized the enormous export opportunities in the GCC, now one of the top 13 markets for our agricultural exports.”